Retirement Annuity

Studies throughout southern Africa have shown that about six percent of the population will be able to retire comfortably. The rest of the population will battle to make ends meet and become a liability to their families who will need to support them.

Some people will have to rely on the state pension, currently P 151 per month to live. Would you be able to live on that amount of money? The government is not in a position to provide substantial state pensions that will allow its citizens to maintain their same standard of living after retirement.

It is for this reason that the government has introduced legislation that effectively protects and encourages its citizens to provide for their own retirement.

A Retirement Annuity is an individual savings scheme that an individual (referred to as the member, will use to provide for his/her own retirement in the form of a monthly income (a pension), through the purchase of an Annuity; and it falls outside any Employee Benefits provided by employers.

It further provides for some tax relief to the member while he/she is making contributions to the RA. The concessions allow funds, managed for retirement, to enjoy lower tax obligations, and furthermore, premiums are deductible from taxable income within specific limits.

Contributions to an approved fund are allowed as deductions subject to the limits of 15% of chargeable income excluding investment income for individuals and 20% of the employee’s employment income for the employer. Subject to the specified limits contributions to the Botswana Life Pension Scheme would be deductible.

The rules that apply to a RA also differ to that of a standard assurance policy. Once a RA is taken out it becomes completely non-negotiable. The reason for this is that the Law protects the RA so that at retirement age the member would not have lost his/her valuable benefits and become a burden on the state.

A single lump sum of money can be used to purchase a variant of the normal type of Retirement Annuity that is known as a Single Premium Retirement Annuity.